SWOT Analysis

What is SWOT Analysis?

SWOT analysis is a framework that enables a company to identify its strengths, weaknesses, opportunities, and threats.

A SWOT analysis enables a company’s management to create a firm-specific business model that helps it to align and match the organizational resources to the demanding environment in which it operates.

The SWOT acronym itself stands for strengths, weaknesses, opportunities, and threats.

Albert Humphrey is credited for developing the SWOT framework between the 1960s and 1970s at the Stanford Research Institute. It was originally developed based on the data from the Fortune 500 companies.

Eventually, businesses of all sizes started adopting the framework to help them make different business decisions.

It has one primary goal - bring focus on all the associated factors while making a business decision or a long-term strategy.

Understanding SWOT Analysis

By using the SWOT framework, businesses open up several possibilities. If it's a product company, they know what is selling best and what isn't.

They can even brainstorm as to what age group or specific geography might like their product and what competitor company’s product might be a threat to theirs.

There are endless possibilities as to how beneficial the SWOT analysis can prove to be a game changer for businesses. The framework can even be applied to people, an industry, or any other entity.

For example, perform a SWOT for a chair. What is its strength? Imagine a room where two people have been standing for 50 straight hours. The chair has the ability to allow one person to sit on it.

However, is it's weakness? It allows only one person to sit while the other person may have to spend another hour standing up.

The opportunities? Well, make the people stand another 50 hours, and it won’t take time for either of them to start a fight to have 100% rights on the chair. The only threat is that in this quarrel, the chair is possibly breaking and allowing none of them to rest!

Thus, it considers all the internal and external factors and helps make decisions that most likely benefit the business/entity.

Components of SWOT Analysis

As mentioned earlier, SWOT comprises four components - strengths, weaknesses, opportunities, and threats. Every company or individual would have a unique value for each of these components, or at least vary up to a certain extent.

However, A SWOT analysis must include all of these components and should not omit any of them.

Strengths

Strength represents everything that separates the organization from its competitors - whether it is its product line, services offered to the customers, strong marketing efforts, or a really faithful customer base etc.

For example, a company develops a ‘sugar alternative’ that is healthy and has no side effects. It is the sole producer of the sugar alternative compound and enjoys a monopoly in a newly found market.

Weaknesses

Weaknesses are the features that the organization needs to work on. For example, even though the company has developed a ground-breaking ‘sugar alternative,’ the marketing team hasn’t been able to reach the audience who might be looking for such a product.

The result has been weak sales so far.

Opportunities

Considering the health-conscious people everywhere, the company has ample opportunities to grow if the marketing team plays to its strengths correctly. This could be a huge market looking to substitute sugar for one of the alternatives.

Threats

If you can do it, so can someone else. If the company does not use the head start wisely, it might eventually lag back in the long term once a worthy competitor enters the equation.

SWOT Table

A SWOT table is a four-quadrant table representing each component of the SWOT analysis.

The SWOT table is used to give a quick overview of all the points that may fall under each of the components. Who has got time to go through all the points, right?

Thus, the table gives a glance at the company’s position in the current scenario.

While the points that you mention may not need to be of equal importance, they all provide insights into the strengths, weaknesses, opportunities, and threats associated with the company.

The layout of the table is described below:

1. The internal factors are laid out on the top row.
2. The external factors are laid out on the bottom row.
3. Positive items are placed on the left side of the table.
4. Negative items are placed on the right side of the table.

How to Conduct a SWOT Analysis

There are several steps that you need to follow to perform the SWOT Analysis. This includes gathering the appropriate resources, brainstorming ideas, finding conclusions, and developing a strategy based on the findings.

Follow the following steps below to conduct a SWOT analysis.

Step 1 - Determine the need for a SWOT Analysis

First and foremost, you must decide why you need to do a SWOT analysis. Is your company going for a Series A fundraiser in the market but fearing that the nearest competitor has an edge?

Once you have decided on an objective, you know what you expect at the process's end.

Step 2 - Gather Data

Find all the relevant information on the companies. Since you are going for the Series A raise, look for the latest financials as well as the product line of the competitors.

Do they have star players on the marketing and operations team? Do they have loyal customers and well-established distribution channels?

Try to have as much data as possible. You might even have employees who might have worked at similar companies and might provide you with crucial information.

Step 3 - Brainstorming 

Once you have all the information at your disposal, select a group of great things and ask them to brainstorm on the information.

Firstly, segregate information into factors that have an impact on the company internally or externally.

Internal factors include your product line, tangible and intangible assets as well as your team, while the external factors include market trends and customer demographics.

Internal factors can be used to identify strengths and weaknesses, while external factors can help you determine opportunities and threats.

The potential questions for each component could be: 

• Which is our top selling product (strength)
• Why does our marketing team fail to meet the targets? (weakness)
• Do we have a really large market size? (opportunity)
• We operate in a crowded market. What is the market share of the competitors? (threat)

In this way, you could find several questions for each component that need to be jotted down in the brainstorming session. This would eventually create the SWOT table.

Step 4 - Reaching Conclusions

Once you have all the points on the SWOT table, it is time to refine your thoughts even further. Maybe some of the points don’t make sense, or enough data cannot back them up. But that is all right; just get ready for round 2 of the brainstorming session, and you are good to go!

Step 5 - Developing a Strategy

Finally, you have the refined version of the SWOT analysis that provides you with a complete overview of the company. Now, you can get down to plan a strategic move based on the findings.

Is the competitor we spoke to really a hurdle for the Series A fundraiser? Is our revenue greater than theirs when they raised their Series A? Would their new product hurt us in the short or long term?

Some of these questions can now easily be answered or even overlooked if your company outweighs the competitor's strengths and opportunities. 

SWOT Analysis Benefits

The benefits of performing a SWOT analysis are described below.

A SWOT analysis simplifies complicated problems

When we initially look at the problem, it might look like a humongous task. You know the problem, but you do not understand how you could solve the problem.

You might have even collected all the relevant data to understand the problem. However, the problem eventually looks a lot smaller when all the data points are analyzed and aggregated into understandable reports. What seemed like a daunting task becomes easily manageable.

A SWOT analysis considers external factors

A lot of times, businesses assume that if they work on internal factors, the business will bloom. Their only focus is on the internal factors that can blind them to the macro trends in the industry or geographical region.

A SWOT analysis helps them to consider even the external factors that can ultimately affect the business, even though they might be a bit out of their control.

A SWOT analysis can be applied to ‘anything’

Whether it is evaluating a business opportunity, CXOs, individual team members, product lines, or even acquisition targets, a SWOT analysis can be applied to everything and has a ‘n’ number of applications.

A SWOT analysis requires data from different sources

A SWOT analysis includes external and internal factors. The company may dig deep into its database to identify relevant points based on internal factors to identify strengths and weaknesses. This basically means that there could be data from the financial department, sales and marketing, or even operations.

On the other hand, external factors help to identify opportunities and threats. Since it is ‘external factors,’ you can only imagine the number of data sources to build a robust SWOT analysis report.

A SWOT analysis report can even be prepared in-house

The framework for preparing a SWOT analysis report is really simple, If you know the structure, it becomes really easy to prepare it. Yes, you might need some people who all think differently for brainstorming, but if it's a skill that can definitely be taught and performed by even your teammates.

SWOT Analysis Example

In this section, let’s perform a SWOT analysis for WSO’s IB Interview Course. This is again to prove the point that you could use the SWOT analysis for almost anything and also to prove how good our IB Interview Course is (wink;))

As with the usual framework, we will go with the two categories - internal and external factors. Let’s focus on internal factors first.

To identify the strengths and weaknesses, we can ask several questions:

1. Is it our top seller in the ‘interview’ series of courses?
2. Do we provide additional content/programs/sources apart from the course?
3. Is there a monthly growth in the number of allotments?
4. How has the feedback from the students on the course been so far?

Based on this, the strengths and weaknesses can be determined.

For example, the strength of the IB Interview Course is that it not only helps you to nail all the technical questions but also provides you exclusive inside information on several banks.

It gives you a framework to answer behavioral questions, which are the backbone of such interviews.

As for the weaknesses, you could say that we haven’t been great at marketing this ‘much needed’ course for the students looking to pursue a career in IB.

Opportunities and Threats are all about external factors. Many questions could be asked on this:

1. Are some of our competitors offering a similar course?
2. What is the percentage of people who are opting for a career in IB?
3. If we drop our price, will the demand for the course increase?

The opportunity in this scenario could be the rising number of IB aspirants who are looking to carve a career in this space. Our community acts as a starting point to leverage this opportunity, with us providing honest feedback and opinions.

There are always threats in the business. What would be the threat to our IB Interview course?

Someone could definitely come in with an exceptional resource person and build a competitively similar course. But you know why we stand out? Because our community backs our courses.

This is the same point we mentioned earlier; threats can also help you identify or develop a differentiating factor that can be advantageous for many businesses.

Researched and Authored by Akash Bagul | Linkedin

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